LCQ2: Ensuring financial viability of major infrastructure projects
It has been reported that the Inland Revenue Department (IRD) issued a total of about 2.4 million of tax returns for individuals for the year of assessment 2022/23, which is a decrease of about 220 000 and 70 000 compared with the years of assessment 2020/21 and 2021/22 respectively, and marks the third consecutive year of decline. There are views that the reduction in the number of individuals required to file tax returns may put pressure on the Government's finance, thus affecting the commencement of various major infrastructure projects. In this connection, will the Government inform this Council:
(1) whether it has examined the reasons for the continuous decrease in the number of tax returns for individuals issued by IRD in the past three years of assessment;
(2) whether it has assessed the impact of the reduced number of individuals required to file tax returns on the Government's finance and revenue; and
(3) given that a number of major infrastructure projects will be coming on line in the future, such as the artificial islands in the Central Waters under the "Lantau Tomorrow Vision", the Northern Metropolis and the "three railways and three roads", how the Government, under the circumstances that the tax revenue is under pressure, works towards keeping the Government's credit rating unaffected, and ensures the financial sustainability and viability of various major infrastructure projects?
We thank Ir Hon Lee for the question. Regarding the management of public finances, the Government has all along been striving to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product by adhering to fiscal discipline and conforming to the requirement of Article 107 of the Basic Law, which states that the Government shall follow the principle of keeping expenditure within the limits of revenue and committing resources as and when justified and needed. We will strictly contain the growth of government expenditure and explore various ways to increase revenue. Moreover, we will consider utilising appropriate financial instruments to better manage cash flow, and launch several major infrastructure and works projects as scheduled to benefit the public as early as possible.
Having consulted the Development Bureau (DEVB) and the Transport and Logistics Bureau (TLB), our reply to the question raised by Ir Hon Lee is as follows:
(1) For the years of assessment 2020/21 and 2021/22, the Inland Revenue Department issued a bulk of 2.62 million and 2.47 million Tax Returns - Individuals respectively. For the year of assessment 2022/23, a bulk of about 2.4 million Tax Returns - Individuals have been issued early this month. There are many reasons for the decrease in the number of Tax Returns - Individuals issued in bulk. For example, some salaries taxpayers might have fallen out of the tax net because their incomes had reduced due to global and local economic conditions in recent years; others with low or middle income did not need to pay tax as they benefited from the 100 per cent tax reduction (subject to a ceiling of $10,000 to $20,000) offered over the past three years; and some taxpayers did not have income sourced in or derived from Hong Kong and were not required to file tax returns due to various reasons such as retirement, pursuing further studies or having left Hong Kong.
(2) Salaries tax is a major tax item in Tax Returns - Individuals. In the past three financial years, revenue from salaries tax accounted for about 11 per cent to 13 per cent of the total government revenue. Revenue from salaries tax in 2020-21 was $75 billion, while that in 2021-22 and 2022-23 increased to $75.6 billion and $79.5 billion (provisional figure) respectively. Such a rising trend shows that the fluctuation in the number of Tax Returns - Individuals issued has not affected revenue from salaries tax.
(3) Major infrastructure projects, such as the Northern Metropolis Development Strategy, the Kau Yi Chau Artificial Islands and the three railways and three major roads recommended under the "Strategic Studies on Railways and Major Roads Beyond 2030" (three railways and three roads), are important investments for promoting our long-term and sustainable development. The implementation of infrastructure projects will increase land value and foster economic development, generating enormous economic benefits and revenue in the long run. While substantial funding is required for the major infrastructure developments, the Government also has to retain its financial strength in order to cope with changes in the external environment and maintain our social and financial stability.
As always, when taking forward major infrastructure projects, the Government will, taking into account relevant factors such as fiscal sustainability and viability, carry out detailed financial assessment and exercise cost control. At the same time, we will adhere to the principle of financial prudence and accord priorities to projects to ensure that the Government maintains the financial capabilities to meet public expenditure and maintain services while implementing infrastructure projects for promoting the development of our society and improving people's livelihood.
Major infrastructure projects involve various components. The Government will keep an open mind when considering different financial arrangements, and will actively consider making appropriate use of market capital, including adopting "public-private-partnership. The DEVB and the TLB will conduct detailed design and determine the implementation arrangement for the three projects, in order to make comprehensive cost estimates and formulate appropriate financing proposals at a suitable time.
Thank you, President.
Ends/Wednesday, May 10, 2023
Issued at HKT 12:35
Issued at HKT 12:35